Market trends

Executives Weigh in on Election Impact

AlphaSense

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December 29, 2020


US Capitol
US Capitol

Democrats’ dreams of a ‘blue wave’ crashed as Republicans failed to flip House and Senate seats in the swing states, including Texas, North Carolina, Iowa, Pennsylvania, and Michigan. However, with its origins in the 2018 midterm elections, the term ‘blue wave’ became the buzzword of the moment within broker reports this election cycle as analysts attempted to understand and project the potential impacts of this election.

With the election now behind us and final vote counts still being tallied as of Friday morning, analysts and corporate leaders alike are both hanging in uncertainty. So unsurprisingly, analysts were interested in unpacking potential scenarios from Energy, Cannabis, and Real Estate leaders. Below, we’ve compiled executive commentary from earnings calls this week to highlight how corporate leaders calculate the impacts of the election results.

This Week’s Election Chatter

Vitrolife – 11/6

Look, we got to respond from 1 customer that said, the clinic then that, we see a higher inflow from patients than ever. And there were two reasons behind it. One was that their patients now are working from home. So they had time to go into it and start the procedure. And also that some customers were afraid of more regulations in case Biden won; they were worried that it could be more regulation. So, therefore, they want to go into the clinic as soon as possible.

Cronos Group – 11/5

I think that one of the essential things and I’ve always maintained this, was getting past the election and allowing, from just a political process perspective, everyone to sit down and look at what’s the best way to put in regulations and put in policies, whether that’s a stimulus or building up industries that can help rebuild some of what the economy lost over the last year. And it isn’t easy to do that when you’re in an election year. So for us, it wasn’t — it’s something going to happen immediately after. So I think that always sounds better than what the actual practice is. But getting past the election was a significant catalyst regardless of who won the blue wave split, and I think we’ll see that starting with stimulus. And I think the cannabis, you see with the ballot initiatives, whether it’s red or blue, where the popular opinion is. You know the need for jobs. You need — we need tax revenue. We need social justice reform. And there is just a straightforward and elegant solution, and that is advancing cannabis legislation.

TPI Composites  -11/5

I think it’s a little bit difficult to answer at this point because there’s not a lot of detail behind the plan. So he’s got the made in America and an offshoring tax as well. So we’ve looked at what’s out there. And it’s a little bit early yet to describe what the impact might be, but, again, we have manufacturing capacity here in the U.S. And depending on what that means, it could mean additional power over time, depending on demand and what those provisions might ultimately be if they come into fruition. But it’s a little early to tell right now what the impact may or may not be.

Bright Horizons Family Solutions – 11/5

So indeed, we’ve reviewed the Biden proposal thoroughly and believe that government involvement in child care can be positive if done in the right way. The idea of universal Pre-K and other supports that Biden has suggested would be in his plan are things that broadly would support child care, and therefore, we would be supportive of.

We operate in environments like the U.K. and the Netherlands, where financial support of child care exists, and it’s an essential part of the overall model that we have in those countries.

I think, for better or worse, we have a long history of evaluating political plans. And unfortunately, the fiscal reality tends to be where the plans fall apart and ultimately don’t get implemented. So while we like the idea of the U.S. having more financial support in the area of child care, we never count on that in our model.

Euronav – 11/5

The way we see it is if Biden was going to win the election and if you would have a majority in the Senate and the chamber, I think that it will try to be a little bit more forceful on the path to decarbonization. I believe that the blue wave that was predicted is not the one that we are seeing. Even if he has a majority, it’s going to be a very, very thin majority. And given that fact, I think that we’re not going to have a revolution. I think we’re going to have an evolution. I believe that we will be very mindful of not hitting the economy. That would be his priority.

I mean, quite frankly, when you look around the world, this COVID crisis has impacted pretty much everyone, including the U.S. And so we are not expecting something radical in terms of a clean energy program. It’s certainly not something as big as what he announced when he was a candidate. But, on the other hand, I think the reality will hit if he is the one to become the new president. So we’re not too worried about it because if it’s evolutionary rather than revolutionary, I think that we are always in a good place to adapt to that.

The second aspect, which seems to be more apparent if he wins, is the Iranian situation and how soon we will reenter the deal because that may impact Iranian oil production. And to a certain extent, I would say a lesser extent, the Iranian fleet. But that’s not a fleet that is in excellent condition. So we are not too mindful about it.

MGIC Investment Corp – 11/5

I mean, I think. There is speculation that there might be a more substantial stimulus if there was a blue wave. But, ultimately, we have some expectations that there will be stimulus — some additional stimulus. Part of it has to do, I think, with the virus’s path, which is challenging to know. But I still think our view is that we would expect some amount of stimulus, although I think there’ll probably be a lot more discussion about it, again, where the election seems to be trending. But I’d say ultimately, we believe there will be some. In general, again, I view housing as being extremely resilient through all of this. So while the size can matter, I think it probably matters a little less from a housing standpoint.

Pioneer Natural Resources Company – 11/5

First of all, based on the Senate results, I think we’re going to be down to 2 key Georgia races, but I would expect Purdue to win. So that would be 51 Republicans on the Senate, and then they’ll have the runoff in early January. And I would hope that person. So my guess is the Senate will end up losing one seat. The Republicans will be 52, 48. So in that regard, there should be no effect regarding tactics in the future. Biden will do the big unknown for people who own federal acreage to stop giving drilling permits. He’s already said he will ban, he will not ban fracking, but he can do other things like stop issuing drilling permits which would affect New Mexico, Wyoming and the Gulf of Mexico, and federal waters. And so nobody knows whether or not he’s going to do that, but that could have a significant impact on U.S. production long-term if he stops giving drilling permits. Other things, he’ll roll back some of the — Trump’s movement, like on the emissions of 2016, which we were totally against Trump doing that. Still, Biden would have the EPA under his control and probably roll back any Trump’s emissions. So those are the more significant issues that I see that will affect the industry.

Marathon Oil – 11/5

The current uncertainty around federal land is a good reminder of the benefits of our multi-basin model asset diversification and capital allocation flexibility. Indeed, we’re realistic that with a Biden win, doing business on BLM land will become more complex. And those are his words, not mine.

Energy Transfer LP – 11/4

So I guess, kind of from our standpoint, as far as the election goes, I’m not sure we’re in the same boat that it’s already been decided. Indeed, that could happen. We think it’s probably still a toss-up for a whole number of reasons, but we certainly want to over the next 2 or 3 days. But just assuming your question that Biden was to win, we’ve said in the past, we — there’s some uncertainty about his positions over the years. At one point in time, he was pro-pipeline. He was kind of always pro-fracking, and he backed off on that. And now supposedly going to ban some types of fracking, mainly around federal lands. But the positives are in a Democrat-controlled government is that the regulations will no doubt increase. So it will be much more difficult to build pipelines, construct pipelines, get pipelines permitted, and be very time-consuming. 

Ternium SA – 11/4 

Election in the U.S., what happens if Biden wins? To be honest, I don’t see a lot of changes regarding manufacturing if Biden wins. I mean, I don’t think it’s going to change a lot of 232. Probably, he’s going to, I mean, negotiate or be a little bit more flexible with some countries, which should have been in the 232 probably in the first place. But I don’t — I mean the — think of this U.S. — this regional approach where a manufacturer has to come back to the region, to the U.S., to Mexico to Canada, this reshoring thing, it’s in the mind of Donald Trump really, the actual president. But it’s also on the mind of the Democrats. So I don’t think there’s going to be a lot of changes.

On the contrary, both candidates are going to try to make more robust manufacturing in the region. Biden — if you ask me, one of the things Biden is going to do a little bit more than the actual probability is in the environmental issues, which for us, for Ternium should be a perfect thing regarding our footprint, our environmental footprint, and how we are doing a lot of things. But that’s the only change that I see.

Vornado Realty Trust and Alexander’s Inc – 11/4

There’s another group of folks down there who would like to continue spending at the level they have been spending and close the deficits by assistance from Washington. How this plays out will probably be some combination of both, but it will play out. The promise that the Democrat side made, which is that they will reverse the Trump tax plan and reverse the salt. I see that as being a very, very, very hard lift. So I don’t know where that will go.

Hamilton Lane Inc – 11/4

As of last week, we expected more realization activity because of a belief that taxes in the United States would increase since like people wanted to get deals done before year-end. If the election results, unclear whether there will be as big a push for higher taxes. So depending on how that shakes out, you will see whether activity increases solely for that reason. I suspect deals that are in process will continue that that has caused them. I think just in general, I believe what you hear from us is markets are strong, and exit activity is good. And indeed, relative to earlier in the year, we’ve seen deal activity increasing across all geographies and most sectors. So I don’t unless we tell me that markets will correct significantly, I would expect the action in equity.

Scotts Miracle-Gro Co – 11/4

The other great news for Hawthorne is what we expect from yesterday’s election. Look, people are still counting votes, so I don’t want to get too far ahead of myself. We hope New Jersey approves recreational adult use of cannabis, and there’s a good chance that Arizona will do the same. Going into the election, there was also good polling from South Dakota, Montana, and Mississippi. On top of that, the Governors in New York and Pennsylvania have said in recent weeks that they’ll look to legalization to help them make up some of the budget deficits that COVID-related issues have caused. Who knows what’s going to happen in D.C.

Chimera Investment Corp – 11/4

I think the best thing that happened — I mean, first of all, I mean, the housing market is screaming, and I think that’s great for our portfolio and the credit of our portfolio. So that’s terrific. I don’t think that’s going to change with the election results. And I think regardless of what happens in the presidential election, it looks like the Senate will be very close, maybe stay Republican, which I believe a divided government is probably not a bad thing for different markets.

Eaton Corporation PLC – 11/3

 I can tell you that even though the current administration perhaps has not been as focused on the green, we continue to see increasing investments around the world in energy transition and the greening of the economy.

So I think they’re the secular growth trends that we’re experiencing inside of the global economy that is essentially bigger than any administration in the U.S., So I think it will be positive for us, independent of who’s in the White House.

Williams Companies Inc – 11/3

If there were a Biden administration win would be — a corporate tax raise. And actually, that works out to be a positive for us within our regulated assets because that would allow us to raise the rates back on the Northwest pipeline that we had to lower when the corporate tax rate was lower.

Fox Corp – 11/3

And then to your second question, Michael, as far as the impact on FOX News of the presidential election, of course, it’s been a — to date, an incredible new cycle throughout the election, but also through the other great new stores and massive new stores out the year. COVID is the main one. So we see as we — and by the way, that’s driven ratings. It’s gone revenue; I think FOX News’s advertising revenue is up 36%, which is a tremendous result.

Waste Management – 11/2  

We will — regarding environmental regulation, it is interesting for us that — first off, all of our focus is not necessarily on the federal elections. We tend to focus on state elections, too, because the state has such an important place. So that’s a vital role for us, and that carries over to environmental regulation.

But as it relates to the federal elections tomorrow, we’ve said that regulation is, in a strange way, a good thing for WM because we hold ourselves to a very high regulatory standard, environmental standard. And so, any additional regulation tends to work in our favor. So to the extent that that comes out of tomorrow’s election, that could be a good thing for us.

Orix Group – 11/2  

And also, with the presidential election being scheduled tomorrow, and there seems to be no concerted effort being exercised by the countries of the world, and also the second wave of COVID-19 is affecting Europe, so, therefore, we have to anticipate a particular impact, negative impact remaining for the time being.

Shell – 10/30  

Yes. Thanks. First and foremost, we’ve operated a very successful business throughout several multiple administrations. And we found ways to deliver across that. So those come and go. Indeed, they’ll have their challenges. As far as the Gulf of Mexico, in my comments earlier about being bullish on the Gulf of Mexico, if you listen to Shell’s webcast and their earnings webcast, a couple of things to note. Ben highlighted the need for hydrocarbons for the following decades, and there’ll be a role for hydrocarbon in the following decades against the backdrop of the energy transition. We can certainly talk more about that. But there will be continued investment by Shell in the hydrocarbon chain. They’re going to take a very focused approach to that. And one of those areas is explicitly the development of the Gulf of Mexico.

CMS Energy Corp – 10/29

There’s a real problem with the ITC with solar that utilities can’t because normalization can’t take full advantage of. So If there were some fixes from a tax perspective on the ITC for solar, that could be interesting for utilities and could potentially make solar deployments more economic faster. And so I do think there will be some exciting developments with — if there is, in fact, a blue wave here in a couple of weeks.

Southern Co –  10/29

There’s a little bit of an assumption about what happens with the environment and coal and gas prices, but I think you’re going to see something similar to this 2020 mix. Nuclear will go up a wee bit, maybe in the 2%, so possibly 19% would be nuclear, something like that. Gas would dropdown. The marginal cost of nuclear is very cheap. Coal depends on what happens with the environment. And that depends a lot, to a large extent, on the elections in the future. If you have a blue wave, it may be that we would see perhaps tighter regulation and coal waning importance, but we’ll see. The other significant factor is you should see renewables increase in volume. 

Novatek Joint Stock Company – 10/29

We’re also in the midst of the U.S. presidential election next week, which could have profound changes to the oil and gas industry; depending on which party, whether Democrats or Republicans win, I think there’s quite a difference in terms of the platforms related to energy. So we want everybody just to remain patient.

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